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EXHIBIT 10.12
AMENDMENT OF CONCESSION AGREEMENT
SIGNED BY VIRTUE OF LAW NO. 9 OF 1981
AS AMENDED BY LAW NO. 222 OF 1989
FOR PETROLEUM EXPLORATION AND EXPLOITATION
IN KHALDA AREA
WESTERN DESERT OF EGYPT
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
THE EGYPTIAN GENERAL PETROLEUM CORPORATION
AND
REPSOL EXPLORACION EGIPTO S.A.
AND
PHOENIX RESOURCES COMPANY OF EGYPT
AND
SAMSUNG CORPORATION
THIS AMENDMENT is made and entered on this 21 day of May, 1995 by and between
the ARAB REPUBLIC OF EGYPT (hereinafter referred to as the "A.R.E." or
"GOVERNMENT"), the EGYPTIAN GENERAL PETROLEUM CORPORATION, a legal entity
created by Law No. 167 of 1958 as amended (hereinafter referred to as "EGPC"),
and REPSOL EXPLORACION EGIPTO S.A., a company organized and existing under the
laws of Spain (hereinafter referred to as "REPSOL"), PHOENIX RESOURCES COMPANY
OF EGYPT, a company organized and existing under the laws of the State of
Delaware, U.S.A. (hereinafter referred to as "PHOENIX"), and SAMSUNG
CORPORATION, a company organized and existing under the laws of Korea
(hereinafter referred to as "SAMSUNG"); REPSOL, PHOENIX and SAMSUNG being
hereinafter collectively referred to as "CONTRACTOR".
WITNESSETH:
WHEREAS, by the Concession Agreement for Petroleum Exploration and Exploitation,
signed by virtue of Law No. 9 of 1981, and effective the
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sixth day of April 1981 and which is amended by virtue of Law No. 222 for 1989
to incorporate new clauses to grant rights respecting natural gas, the
GOVERNMENT granted to EGPC and other CONTRACTOR parties the right to explore
for and produce petroleum from the "Khalda Area" in the Western Desert of the
A.R.E. The Concession Agreement and its amendment shall be hereinafter referred
to as "Concession Agreement"; and
WHEREAS, it is believed that exploratory prospects exist on the offset area to
the development leases located in the Khalda Area subject of the Concession
Agreement; and
WHEREAS, the Offset Area is needed so that the prospects may be tested and
adequately developed if Petroleum is discovered in sufficient quantities; and
WHEREAS, in accordance with good international petroleum field practices and
accepted international petroleum engineering principles, EGPC and CONTRACTOR
agree to further amend the Concession Agreement in order to incorporate the
aforementioned Offset Area and to provide for its development and exploitation
under such Concession Agreement and this amendment.
NOW, THEREFORE, the Parties hereto agree as follows:
The Concession Agreement is hereby further amended in the following respects
only:
a) By inserting the following at the end of the text of Annex "A" of
which it shall be considered a part:
"In addition to the Area as described elsewhere in this Annex, the
Area covered and affected by this Agreement includes the Offset Area
described here-below. The Offset Area consists of Sub-Area "A" and
Sub-Area "B". Both Sub-Areas shall be considered as a part of the
Concession Agreement.
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Both Sub Area "A" and Sub-Area "B" consist of 73 full Exploration
blocks 6' x 6' and 12 parts of Exploration blocks, and excluding the
Khepri/Sethos Development Lease. The total of the Offset Area is
approximately 8490 Km(2). The coordinates of the corner points of the
offset area are as follows:
SUB-AREA "A":
Latitude Longitude Due to
-------- --------- ------
NORTH EAST
----- ----
1. 30 degrees 54' 27 degrees 36' South to point 2
2. 30 degrees 30' 27 degrees 36' West to point 3
3. 30 degrees 30' 27 degrees 06' South to point 4
4. 30 degrees 12' 27 degrees 06' West to point 5
5. 30 degrees 12' 26 degrees 00' North to point 6
6. 30 degrees 30' 26 degrees 00' East to point 7
7. 30 degrees 30' 26 degrees 12' North to point 8
8. 30 degrees 35' 26 degrees 12' West to point 9
9. 30 degrees 35' 26 degrees 00' North to point 10
10. 31 degrees 00' 26 degrees 00' East to point 11
11. 31 degrees 00' 26 degrees 24' South to point 12
12. 30 degrees 48' 26 degrees 24' East to point 13
13. 30 degrees 48' 26 degrees 36' South to point 14
14. 30 degrees 42' 26 degrees 36' East to point 15
15. 30 degrees 42' 26 degrees 48' South to point 16
16. 30 degrees 30' 26 degrees 48' East to point 17
17. 30 degrees 30' 27 degrees 00' North to point 18
18. 30 degrees 36' 27 degrees 00' East to point 19
19. 30 degrees 36' 27 degrees 12' North to point 20
20. 30 degrees 42' 27 degrees 12' East to point 21
21. 30 degrees 42' 27 degrees 18' North to point 22
22. 30 degrees 48' 27 degrees 18' West to point 23
23. 30 degrees 48' 27 degrees 12' North to point 24
24. 30 degrees 54' 27 degrees 12' East to point 1 (starting point)
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The Khepri/Sethos Development Lease lies within Sub-Area A, and is excluded
from the additional acreage to be added to the Khalda Concession Agreement. The
following are the coordinates of the corner points of this excluded area:
Khepri/Sethos Development Lease excluded area:
Latitude Longitude Due to
-------- --------- ------
NORTH EAST
----- ----
1. 30 degrees 45' 26 degrees 25' South to point 2
2. 30 degrees 39' 26 degrees 25' West to point 3
3. 30 degrees 39' 26 degrees 24' South to point 4
4. 30 degrees 38' 26 degrees 24' West to point 5
5. 30 degrees 38' 26 degrees 13' North to point 6
6. 30 degrees 45' 26 degrees 13' East to point 1 (starting point)
SUB-AREA "B":
Latitude Longitude Due to
-------- --------- ------
NORTH EAST
----- ----
1. 31 degrees 00' 27 degrees 00' South to point 2
2. 30 degrees 54' 27 degrees 00' West to point 3
3. 30 degrees 54' 26 degrees 51' South to point 4
4. 30 degrees 51' 26 degrees 51' West to point 5
5. 30 degrees 51' 26 degrees 42' North to point 6
6. 30 degrees 54' 26 degrees 42' East to point 7
7. 30 degrees 54' 26 degrees 45' North to point 8
8. 30 degrees 57' 26 degrees 45' East to point 9
9. 30 degrees 57' 26 degrees 51' North to point 10
10. 31 degrees 00' 26 degrees 51' East to point 1 (starting point)
b) By inserting map "B1" and the text attached as Exhibit (I) to this
Amendment at the end of Annex "B" of which they shall be considered as
an integral part.
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"B1" is a map of the Offset Area to the Khalda Development Leases at a
scale of 1:1,100,000. It should be noted that the delineation lines
of the individual Exploration Blocks in the map "B1" are intended to
be only illustrative and provisional and may not show accurately their
true position in relation to existing monuments and geographical
features.
c) The following provisions shall apply to this Amendment:
ARTICLE I
WORK PROGRAM AND EXPENDITURES DURING
EXPLORATION PERIOD
(i) CONTRACTOR shall commence Exploration Operations in the Offset Area
hereunder not later than six (6) months after the Effective Date of
this Amendment. Not later than the end of the eighteenth (18th) month
after the Effective Date of this Amendment, CONTRACTOR shall start
exploration drilling in the Offset Area with a commitment of drilling
seven (7) ▇▇▇▇▇ and acquiring 100 KM(2) of seismic survey during the
initial Exploration Period. EGPC shall make available for
CONTRACTOR's use all seismic, ▇▇▇▇▇ and other exploration data in
EGPC's possession with respect to the Offset Area, as EGPC is entitled
to so do.
(ii) The initial Exploration period shall be four (4) years starting from
the Effective Date of this Amendment. CONTRACTOR may extend this
initial Exploration period for two (2) additional periods of three (3)
years and two (2) years respectively, each upon at least a thirty (30)
days prior written notice to EGPC subject to its fulfillment of the
expenditure of its minimum Exploration obligations, and the drilling
obligations hereunder for the then current period.
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CONTRACTOR shall spend a minimum of Eight Million (8,000,000) U.S. Dollars on
Exploration operations and activities related thereto during the initial four
(4) year Exploration period; during such initial period CONTRACTOR shall drill
seven (7) ▇▇▇▇▇ and acquire 1000 Km of new seismic. For the first three (3)
year extension period CONTRACTOR shall spend a minimum of Seven Million
(7,000,000) U.S. Dollars and shall drill five (5) ▇▇▇▇▇ and acquire 1000 Km of
new seismic, and for the second two (2) year extension period CONTRACTOR shall
spend a minimum of Six Million (6,000,000) U.S. Dollars and shall drill four
(4) ▇▇▇▇▇ and acquire 300 Km of new seismic.
Should CONTRACTOR spend more than the minimum amount required to be expended or
drill more ▇▇▇▇▇ than the minimum required to be drilled or conduct more
seismic than the minimum required to be acquired during the initial four (4)
year Exploration period, or during any period thereafter, the excess may be
subtracted from the minimum amount of money required to be expended by
CONTRACTOR or the minimum number of ▇▇▇▇▇ required to be drilled or the minimum
kilometers of seismic to be acquired during any succeeding Exploration period
or periods, as the case may be.
In case CONTRACTOR surrenders its Exploration rights under this Amendment
before or at the end of the fourth (4th) year of the initial Exploration
period, having expended less than the total sum of Eight Million (8,000,000)
U.S. Dollars on Exploration, or in the event at the end of the initial four (4)
year Exploration period CONTRACTOR has expended less than said sum in the
Offset Area, an amount equal to the difference between the said Eight Million
(8,000,000) U.S. Dollars and the amount actually spent on Exploration
activities shall be paid by CONTRACTOR to EGPC at the time of surrendering or
within three (3) months from the end of the fourth (4th) year of the initial
Exploration period, as the case may be. Any
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expenditure deficiency by CONTRACTOR at the end of any additional period for
the reasons above-noted shall similarly result in a payment by CONTRACTOR to
EGPC of such deficiency. Provided this Amendment is still in force as to
CONTRACTOR, CONTRACTOR shall be entitled to recover any such payments as
Exploration expenditures in the manner provided for under Article VII of the
"Concession Agreement" according to Article IV hereunder.
In case no Commercial Discovery is established by the end of the ninth (9th)
year, or in case CONTRACTOR surrenders the Offset Area under this Amendment
prior to such time, EGPC shall not bear any of the aforesaid expenses spent by
CONTRACTOR.
This Amendment shall be terminated only with respect to the Offset Area if no
Commercial Discovery is established in the Offset Area by the end of the ninth
(9th) year of the Exploration period. In the event at the end of the initial
Exploration period or at the end of the first extension Exploration period a
well is actually drilling or testing, CONTRACTOR shall be allowed up to a six
(6) month period to enable the completion of drilling and testing of any well
actually drilling or testing at the end of such period and to establish a
Commercial Discovery. Such additional Six (6) month period shall be credited to
the next succeeding Exploration period and consequently shall be subtracted
from such succeeding Exploration period.
ARTICLE II
RELINQUISHMENTS
With respect to the Offset Area, at the end of the fourth (4th) year after the
Effective Date of this Amendment, CONTRACTOR shall relinquish to the GOVERNMENT
a total of twenty five (25) percent of
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the original Offset Area not then converted to a Development Lease or Leases.
Such relinquishment shall be in units of whole Exploration Blocks or parts of
Exploration Blocks not converted to Development Leases so as to enable the
relinquishment requirements to be precisely fulfilled.
At the end of the seventh (7th) year after the Effective Date of this
Amendment; CONTRACTOR shall relinquish to the GOVERNMENT an additional twenty
five (25) percent of the Offset Area not then converted to a Development Lease
or Leases. Such relinquishment shall be in units of whole Exploration Blocks or
parts of Exploration Blocks not converted to Development Leases so as to enable
the relinquishment requirements to be precisely fulfilled.
At the end of the ninth (9th) year of the Exploration period, CONTRACTOR shall
relinquish the remainder of the Offset Area not then converted to a Development
Lease or Leases.
It is understood that at the time of any relinquishment the areas to be
converted into Development Leases and which are submitted to the Minister of
Petroleum for his approval, according to Article (III) (d) of Law No. 222 of
1989 shall, subject to such approval, be deemed to be converted to Development
Leases.
ARTICLE III
OPERATIONS AFTER COMMERCIAL DISCOVERY
On Commercial Discovery, EGPC and CONTRACTOR agree that the Khalda Petroleum
Company (KHALDA) shall be designated to carry out all further Exploration and
Development activities in the Offset Area.
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ARTICLE IV
RECOVERY OF COSTS & EXPENSES
The costs associated with operations in the Offset Area shall be recovered from
the Petroleum produced from the Area under the Concession Agreement and
according to its provisions. Notwithstanding anything to the contrary in this
Amendment, recovery of such costs shall not be made until, with respect to
Crude Oil, commercial production from the Offset Area (whether directly or
through drainage) commences on regular basis or, with respect to Gas, a
Commercial Discovery occurs from the Offset Area and a gas sales agreement can
be applied as approved by EGPC, no costs associated with operations within the
Offset Area shall be recovered in the event the Offset Area is surrendered
pursuant to the provisions of Article II hereinabove.
ARTICLE V
GAS AND LPG PRICING
The Concession Agreement signed by virtue of Law No. 9 of 1981 for petroleum
Exploration and Exploitation in Khalda Area as amended by the Agreement signed
by virtue of Law No. 222 of 1989 shall remain in effect and shall continue to
apply only as to Gas produced from Khalda, ▇▇▇▇▇▇ ▇▇▇▇ and Salem Development
leases.
However, for any new Gas production through new Development operations; the
following Article VII(c)(3) shall be added after Article VII(c)(2) of the
Concession Agreement signed by virtue of Law No. 9 of 1981 as amended by Law
no. 222 of 1989 and shall apply:
(3) Gas and LPG
(i) The Cost Recovery and Profit Shares of Gas subject to a Gas
Sales Agreement between EGPC and CONTRACTOR (as sellers) and
EGPC (as buyer) entered into pursuant to
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Article VII (e) of the Concession Agreement shall be valued,
delivered to and purchased by EGPC at a price determined
monthly according to the following formula:
PG = 0.85 x F x H
-----------
42.96x10(6)
Where:
PG = the value of the Gas in U.S. Dollars per thousand
cubic feet (MCF).
F = a value in U.S. Dollars per metric ton of the Crude
of Gulf of Suez blend "FOB Ras Shukheir" calculated
by referring to "▇▇▇▇▇'▇ Oilgram Price Report" during
a month under the heading "Spot Crude Price
Assessment for Suez Blend". This value reflects the
total averages of the published high and low values
for a barrel during such month divided by the number
of days in such month for which such values were
quoted. The value per metric ton shall be calculated
on the basis of a conversion factor to be agreed upon
annually between EGPC and CONTRACTOR.
H = the number of British Thermal Units (BTUs) per
thousand cubic feet (MCF) of Gas.
In the event that the value of F cannot be determined because ▇▇▇▇▇'▇
Oilgram Price Report is not published at all during a month, the
Parties shall meet and agree the value of F by reference to other
published sources. In the event that there are no such published
sources or if the value of F cannot be determined pursuant to the
foregoing for any other reason, the Parties shall meet and agree a
value of F.
Such evaluation of Gas under a formula providing for a fifteen (15)
percent discount is based upon delivery at the delivery point
specified in Article VII (e) 2 (ii) of the Concession
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Agreement, and is to enable EGPC to finance and maintain the portions
of the pipeline distribution system to be provided by EGPC.
(ii) The Cost Recovery and Profit Shares of LPG produced from a
plant constructed and operated by or on behalf of EGPC and
CONTRACTOR shall be separately valued for Propane and Butane
at the outlet of such LPG plant according to the following
formula (unless otherwise agreed between EGPC and CONTRACTOR):
PLPG = 0.95PR - (Jx0.85 x F )
---------
42.96x10(6)
Where:
PLPG = LPG price (separately determined for Propane and
Butane) in U. S. Dollars per metric ton.
PR = the average over a period of a month of the figures
representing the mid-point between the high and low
prices in U.S. Dollars per metric ton quoted in
"▇▇▇▇▇'▇ LPGaswire" during such month for Propane and
Butane FOB Ex-Ref/Stor. West Mediterranean.
J = BTU's removed from the Gas Stream by the LPG plant
per metric ton of LPG produced.
F = the same value as F under sub-paragraph (i) above.
In the event that ▇▇▇▇▇'▇ LPGaswire is issued on certain days during a month
but not on others, the value of PR shall be calculated using only those issues
which are published during such month. In the event that the value of PR cannot
be determined because ▇▇▇▇▇'▇ LPGaswire is not published at all during a month,
the Parties shall meet and agree the value of PR by reference to other published
sources. In the event that there are no other such
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published sources or if the value of PR cannot be determined pursuant to the
foregoing for any other reason, the Parties shall meet and agree the value of
PR by reference to the value of LPG (Propane and Butane) delivered FOB from the
Mediterranean Area.
Such valuation of LPG is based upon delivery at the delivery point specified in
Article VII (e) (2) (iii) of the Concession Agreement.
(iii) The prices of Gas and LPG so calculated shall apply during the
same month.
(iv) The Cost Recovery and Profit Shares of Gas and LPG disposed of
by EGPC and CONTRACTOR other than to EGPC pursuant to Article
VII (e) of the Concession Agreement shall be valued at their
actual realized price.
ARTICLE VI
BONUSES
CONTRACTOR shall pay to EGPC a non-recoverable signature bonus of One Million
(1,000,000) U.S. Dollars on the Effective Date of this Amendment.
ARTICLE VII
MISCELLANEOUS
(a) The word "petroleum" is substituted for the words "crude oil" where
they appear on three separate occasions in Article III(g)(1) and
Article III(g)(2)(i) of the Concession Agreement.
(b) Article III(g)(2)(i)(b) of the Concession Agreement is amended to read
as follows:
The value, as determined in paragraph (c) of Article VII of the EGPC
share of the Excess Cost Recovery Petroleum taken and
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separately disposed of by CONTRACTOR pursuant to Article VII,
paragraph (a)(2);
PLUS
(c) Article III (g) of the Concession Agreement is hereby renumbered as
Article III (h). This Article III (h) shall read as follows:
In calculating its A.R.E. Income Taxes, EGPC shall be entitled to
deduct all royalties paid by EGPC to the GOVERNMENT and CONTRACTOR's
Egyptian income tax paid by EGPC on CONTRACTOR's behalf.
(d) The last paragraph of Article IV of Annex "D" of the Concession
Agreement which states: "Operating Company shall not engage in any
business or undertake any activity beyond the performance of said
operations.", shall be deleted and replaced by the following:
"Operating company shall not engage in any business or undertake any
activity beyond the performance of said operations unless otherwise
agreed upon by EGPC and CONTRACTOR".
ARTICLE VIII
CONCESSION AGREEMENT FORCE
Except as may be amended by this Amendment, the Concession Agreement and its
amendment shall continue in full force and effect in accordance with their
terms.
ARTICLE IX
EFFECTIVE DATE AND A.R.E. GOVERNMENT APPROVAL
The effective date of this Amendment shall be the date this Amendment is signed
by the Parties after the law is issued by the
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competent authorities of the A.R.E., authorizing the Minister of Petroleum to
sign this Amendment, and giving to this Amendment full force and effect of law
notwithstanding any countervailing governmental enactment.
REPSOL EXPLORACION EGIPTO S.A.
By: /s/ REPSOL EXPLORACION EGIPTO S.A.
----------------------------------------
Date: May 21, 1995
--------------------------------------
PHOENIX RESOURCES COMPANY OF EGYPT
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Date: May 21, 1995
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SAMSUNG CORPORATION
By: /s/ SAMSUNG CORPORATION
----------------------------------------
Date: May 21, 1995
--------------------------------------
EGYPTIAN GENERAL PETROLEUM CORPORATION
By: /s/ EGYPTIAN GENERAL PETROLEUM CORPORATION
----------------------------------------
Date: May 21, ▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ OF EGYPT
By: /s/ ARAB REPUBLIC OF EGYPT
----------------------------------------
Date: May 21, 1995
--------------------------------------
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[MAP]
MAP "B1"
AMENDMENT OF CONCESSION AGREEMENT SIGNED BY VIRTUE OF LAW No. 9
OF 1981 AS AMENDED
[EGYPTIAN TRANSLATION]
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
THE GENERAL PETROLEUM CORPORATION
AND
REPSOL EXPLORACION EGIPTO S.A.
AND
PHOENIX RESOURCES COMPANY OF EGYPT
AND
SAMSUNG CORPORATION
IN 8490 KM2 APPROXIMATELY
SCALE 1:1,100,000
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